Webcast 4/24 -- Sales and Operations Planning for Integrated Business Mgt. with Industry Guru George Palmatier of Oliver Wight Consultants
Steelwedge Software Best Practice Leadership Forum presents
George Palmatier, Principal,
Oliver Wight Consultants.
Tuesday, April 24, 2007
10am Pacific, 1pm Eastern
10:00 AM - 11:00 AM PDT
Click to register

Webcast 4/3 -- Best Practices Leadership Forum
How to Extend SAP for effective Sales & Operations Planning (S&OP)
Tuesday, April 3, 2007
10am Pacific, 1pm Eastern
Mr. Padman Ramankutty, CEO, Intrigosys, LLC., former CEO and Founder, Bristlecone, Inc.
Click to register

Monster Cable, Steelwedge Software to discuss technology-enabled S&OP at the UTK Sales Forecasting Forum, May 15-17 Steelwedge Software, Inc. customer Monster Cable, Inc. will present an overview of their new technology-enabled Sales and Operations Planning (S&OP) at the University of Tennessee’s Sales Forecasting Management Forum on May 13-15, 2007 in Knoxville, Tennessee.

View the Preliminary Schedule for the 7th Annual World Class
Sales Forecasting Management Conference, May 15-17.

New Customers Select Steelwedge Software for Collaborative Forecasting and Sales and Operations Planning (S&OP)
Steelwedge Builds Momentum as Eight Blue Chip Companies Validate that Steelwedge is Easy-to-use, Quick-to-Implement, and Highly Cost-effective

Companies that have selected Steelwedge for Sales Forecasting or Sales & Operations Planning:
-- NVIDIA
-- Ditech Networks
-- Hewlett Packard Pro Curve
    Networks
-- Monster Cable
-- A Netherlands-based
    manufacturer

In addition, the following customers have selected Steelwedge as their proof-of-concept solution:

-- EDS, a $21 billion outsourcing     company
-- Spansion, a leading
   semiconductor company
-- Emerson Electric, a leading     manufacturing company

Previous Webcast 2/27 -- S&OP Best Practices: A Case Study
Tuesday, February 27, 2007
1pm Eastern, 12noon Central,
10am Pacific
Dr. Chris Gopal, Partner, Deloitte Consulting and former VP Operations Strategy, Dell, Inc.
View Webcast Presentation

7th Annual World Class
Sales Forecasting Management Conference
When: May 15-17, 2007
Where: Knoxville Marriott Hotel

VIEW 2006 CONFERENCE SCHEDULE

Industry Blogs
Here are the Industry Blogs that
we watch, and you might want to:

www.crmblog.org
www.supplychainer.com
www.andyonenterprisesoftware.com
www.siliconvalleywatcher.com
blogs.ittoolbox.com/crm
blogs.ittoolbox.com/supplychain
www.vics.org/blog

Using S&OP to Improve Revenue and Margins

By Glen Margolis, CEO, Steelwedge Software, Inc.

Sales and Operations Planning (S&OP) has moved to the forefront as a key strategic weapon to improve alignment between strategic goals and tactical plans. At its core, S&OP is a process that facilitates alignment of the business by balancing supply and demand and by ensuring that strategic trade-offs are reviewed at an executive level.

The process varies greatly across companies; from simple, semi-regular meetings to an on-going, structured process with automated data integration that aligns the enterprise in one plan of record. Appendix 1 provides a summary of the evolutionary path from "Basic" to current "Best Practices" in S&OP.

This article focuses on what is at the core of S&OP -- improving strategic fit through a measured process of balancing supply and demand. In so doing, we will explore what current best practices in S&OP can learn from other industries (3). With this in mind, the below picture illustrates a typical evolution of complex decision making processes:



In the above picture, the path of evolution proceeds from left to right. If we compare current best practices in S&OP with the above, we find that it matches the third box; “Integrated analysis, standard and ad-hoc reporting”.

The fourth box, “Decision Support tools”, is what other industries have implemented to support complex decision making processes. Companies that have invested in well-designed Decision Support tools have reported revenue increases from 3-12% and profit increases from 4-18%.

Current best practices in S&OP fall short of best practices in other industries in two areas:

• Objective: Current S&OP practices are largely an exercise in order fulfillment rather than in strategic alignment and profit optimization.
  
  
• Analytics: In spite of large investments in planning systems, current S&OP decision making is still largely a manual task without much analytical support.

Objective
Although a key driver of corporate profitability, S&OP remains close to its supply chain roots as an exercise in making sure customer demand is met. Other industries have taken this a step further by throwing corporate profitability into the mix -- to balance supply and demand in a way that yields the greatest profits for the corporation, short and long term. Balancing supply and demand then becomes an exercise to find the most profitable match between available capacity and demand.

Analytics
S&OP it is still largely a manual decision making process. With complex supply-demand structures and information overload this can be a daunting task, resulting in missed opportunities and unforeseen “surprises” when the plan is implemented. The problem with manual decision making is that humans generally compensate for complexity by simplifying information and then making “sweeping” decisions that ignore important interactions that take place between lower level supply and demand entities. This is particularly difficult in companies that sell configured products, and/or where different products or components compete about supply resources.

This is where Decision Support tools can help – they are not replacing decision makers, but they offer recommendations, insights and what-if capabilities that manual processing simply is unable to do.

Future Best Practices in S&OP

Best practice companies have reduced information latency, learned to leverage key information to make recommendations, and implemented tools that assist them in identifying exceptions and providing regular performance feedback. This paradigm shift -- from (merely) producing information to making recommendations -- is a proven solution that lends itself well to companies who have reached (current) best practices in S&OP.

Before diving into what the solution would do, let us take a look at what is required in order to be successful:

• Global Perspective: Solutions must be based on an enterprise-wide perspective. This is not to say that it needs to “be everything to everyone”. It simply means that the solution must aim to cut across functional boundaries to provide recommendations that benefit the company as a whole – not specific functions or departments.
  
  
• Clear Objectives: Developing decision support forces the company to define their “real” objectives: Maximize profits? Maximize revenues? Maximize market share? Minimize costs?
  
  This is not to say that other things become unimportant – it simply means that one objective is overarching, and the others become subordinate to that objective. The overarching objective of most companies is to maximize shareholder value, short and long-term – a goal commonly translated into maximizing profitability subject to meeting given revenue targets/growth rates.
  
  
• Leadership: To succeed, visible and active sponsorship at the highest level is imperative.
  
  
• Roadmap: To start out, building decision support systems require a well-designed, pro-forma model of how the business process should work. With this as a starting point, the company can start “chipping away” with a clear end-point in view. Below is a simple diagram illustrating such a “meta model.”
  
  

The following diagram illustrates how business processes in an S&OP process can interact in order to support supply and demand decision making to maximize corporate profitability:



The blue-print model shows that corporate revenue and profit are a direct result of how well supply and sales plans are aligned – represented by the product mix plan. How well this is done, depends on (1) how accurate the demand forecast is, and (2) whether and how supply and sales plans are aligned.

A well-designed S&OP solution can elucidate product mix issues based on demand forecasts and capacity constraints. This, enables executives to make measured trade-offs based on factual information while provide input to supply planners and sales about what products to produce and sell, respectively.
The interesting aspect of this model is the dynamic interaction that can exist between supply and demand plans. For example, if demand (or prices) change, how will that affect the supply plan? Conversely, if the supply plan (or cost structure) changes, how will that affect the sales plan?

Moreover, an effective S&OP solution can point out bottlenecks in the supply chain and put a value on what it would be worth to increase production capacity. On the sales side -- a decision support tool could provide insights about what it would be worth -- in terms of corporate profits -- to modify sales prices. As other industries have discovered, global, closed-loop what-if analysis tools are very useful towards improving corporate profitability.

Conclusions

Decision support tools do not replace decision makers – the real value of such tools are the insights gained from the exercise of using them, resulting in better business decisions and fewer unforeseen surprises.

This article describes what many would label a “revenue management solution” to manufacturing. It includes a decision support tool with a powerful analytic engine that takes as input supply and demand data and computes a product mix that maximizes revenue, profit -- or something else.

Demonstrated in many other industries, manufacturing companies could benefit tremendously from using decision support tools to improve decision making in their S&OP process.

APPENDIX 1 – Current State of S&OP Evolution

The following diagram illustrates four evolutionary stages in manufacturing enterprise planning (including S&OP), from “Basic” to “Best Practices.” Each stage is described in terms of the approach and systems used.



Footnotes
(1) Tactical planning means that it is at a higher level than day-to-day, operational decision making, yet constrained by existing capacity and other long-term resource or customer commitments.
(2) How Does Your Company Compare to the Best Practices in Enterprise Planning (Glen W. Margolis; Perspectives On Enterprise Planning, April 2005).
(3) Industries like transportation, hospitality, freight, and financial services have a long history of exploring and developing tools to assist management in solving complex problems.

About the Author:

Glen Margolis is the CEO of Steelwedge Software, Inc. He has previously served as the CEO of a Contract Manufacturing firm and as a Senior Strategy Consultant for Mercer Management Consulting and Ernst & Young. Glen holds a Bachelor Degrees in Engineering and Architecture from the Webb Institute and a Masters' Degree in Finance from Harvard University.